George Osborne has attacked Nick Clegg for claiming that plans for a
referendum on the European Union are harming the UK economy.

In a further sign of growing tension in the Coalition over the issue the Chancellor appeared to rebuke Mr Clegg, the Deputy Prime Minister, for saying that a referendum is not in the national interest.

Mr Clegg yesterday described the debate on the UK’s place in the EU as “arcane”.

"It is not in the national interest when we have this fragile recovery, when we have a very open economy which is very dependent on investors in the car industry and the banking system and so on,” he told the BBC’s Andrew Marr show.

The Deputy Prime Minister claimed that business leaders he has spoken to are concerned about the uncertainty being caused by a potential in-out referendum.

But Mr Osborne has dismissed any suggestion that a referendum could damage the economy.

“I don’t agree with [Nick Clegg] on this and I don’t think it’s any secret that Liberal Democrats and the Labour party don’t think people should be asked about our future in Europe,” he told BBC News. “A lot of big British businesses and small businesses came out last week and said actually one of Britain’s problems are the taxes and regulations from Europe, and it’s affecting the entirety of Europe and we’ve got to keep up with Asia and America.

“So there is a challenge for all the businesses to get Europe working for us and that’s what David Cameron and myself want to do.”

Mr Osborne said the Lib Dems are “not prepared to trust the people”.

“People...can be trusted with the decision about their future and the country’s future,” he said. “I think we’ll find ourselves in a very odd situation if we get to a general election and parties like the Labour Party and the Liberal Democrats are not prepared to trust the people.

“The Conservative Party is prepared to trust the people and we’re going to ask them after the general election.”

Mr Osborne’s comments came after Grant Shapps, the Conservative Party chairman, indicated that Britain may leave the European Union if David Cameron’s strategy to renegotiate the terms of the country’s membership fails.

Mr Shapps said “we will be in a different position” over Britain’s EU membership “if we can’t get any powers back”.

The disclosure comes after other ministers refused to answer questions publicly on the Government’s position if the renegotiation strategy fails.

Last week, in a landmark speech, the Prime Minister pledged to renegotiate Britain’s membership of the EU and hold a referendum on the revised relationship by 2017.

Mr Cameron has stressed that he is confident that a new British deal can be secured, despite warnings that some other European leaders will block the repatriation of powers. The Prime Minister has said he does not want Britain to leave the EU.

Yesterday, when asked whether the Government would back Britain leaving the EU if renegotiation failed, Mr Shapps said: “I think that most people in this country agree that Europe isn’t what we originally signed up for. It has changed dramatically and so let’s see if we can get some of those powers back.

“If we can’t get any powers back at all then we’ll be in a different position.”